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Feedback from tutor and need to change according to following:

In the first scenario, you have not explained the accounting requirements for a financial asset both on initial recognition and subsequent.

Trade receivables are not relevant nor is settlement date accounting.


In scenario 2, what is the reference to assets and liabilities being recorded at fair value except inventory and machinery? You need to adequately explain equity accounting.


Scenario 3 is too long and does not explain that the assets/liabilities are recognised in the books of Sunderland.


In scenario 4, you need to clearly explain consolidation.


None of the documents in Q2 are relevant.





The purpose of this Memorandum is to explain the profit made by company in number of investment for long term investment.


Investment relationships:

In the first investment made by Sunderland Ltd, purchased 10% issued share of Genesis Ltd. Sunderland Ltd acquired these 10% shared of Genesis Ltd. Therefore, Sunderland is an acquirer in this business combination and Genesis an acquire according to paragraph 6 of AASB 3. According to paragraph 5 of AASB 128 if the entity holds less than 20% of voting power, entity does not have significant influence unless demonstrate. Here, Sunderland Ltd holding only 10% of Genesis Ltd issued shares. So, there is no special relationship between these two companies. Sunderland Ltd initially measure a financial asset as the sum of the fair value of financial asset according to paragraph 5.1.1 of AASB 9. As Genesis Ltd was profitable for last five years and price is steadily increasing along with dividend, Sunderland Ltd will measure its previously held equity in Genesis Ltd at its acquisition-date fair value and recognise the resulting profit and loss, if any profit and loss occur Sunderland Ltd record that in profit or loss or other comprehensive income according to paragraph 42 of AASB 3.

Aside from trade receivables according to the paragraph 5.1.1 of AASB 9, at initial recognition, Sunderland Ltd will measure a financial asset or financial liability at its fair value plus or minus, in the case to the financial asset or liability but not at fair value through profit and loss, exchange costs that are straightforwardly attributable to the acquisition or issue of the financial asset or financial obligation. Sunderland Ltd use settlement date accounting for an asset that is subsequently measured at amortised cost, the asset is recognised initially at its fair value on the trade date according to paragraph 5.1.3 of AASB 9.

Secondly, Bio tech Ltd issued 40% of its shares and Sunderland Ltd will acquired these 40% of Bio tech issued share under the paragraph 6 of AASB 3.

If an entity acquired or holds between 20%-50% of the voting power of the acquiree then entity has significant influence, unless it is clearly demonstrated that this is not the case. Sunderland has significant influence over Biotech Ltd, acquirer has an interest in the associate’s or joint venture’s performance and profit on investment. According to para 11 of AASB 128 Sunderland Ltd acquired 40% of biotech Ltd, all the identifiable assets and liabilities of Biotech Ltd were recorded at fair value except inventory and machinery. According to paragraph 11 of AASB 128 equity methods requires that Sunderland Ltd to include its share of the profit or loss of Bio Tech Ltd in its own financial statements therefore, providing more informative reporting of the Sunderland Ltd net assets and profit or loss. According to AASB 11 profit or loss occurring in future from the activities of the arrangement is shared by Biotech Ltd and Sunderland Ltd based on their participation shares in the arrangement.

Sunderland Ltd is acquirer of assets and liabilities of Digi Tech Ltd and Digi Tech is acquiree in this business combination according to paragraph 6 of AASB 3. According to paragraph 10 of AASB 3, As of the acquisition date, the Sunderland Ltd shall recognise, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in Digi Tech Ltd. Recognition of identifiable assets acquired and liabilities assumed is subject to the conditions specified follow.

In paragraph 11 of AASB 3, to qualify for recognition as part of applying the acquisition method, the identifiable assets acquired and liabilities assumed must meet the definitions of assets and liabilities at the acquisition date. According to para 12 of AASB 3, to qualify for recognition as part of applying the acquisition method, the identifiable assets acquired and liabilities assumed must be part of what the Sunderland Ltd and Bio Tech Ltd exchanged in the business combination transaction rather than the result of separate transactions. According to para 13 of AASB 3, Sunderland’s application of the recognition principle and conditions may result in recognising some assets and liabilities that the Digi Tech Ltd had not previously recognised as assets and liabilities in its financial statements. For example, the Sunderland recognises the acquired identifiable intangible assets, such as a brand name, a patent or a customer relationship, that Digi Tech Ltd did not recognise as assets in its financial statements because it developed them internally and charged the related costs to expense.


Lastly, Sunderland Ltd acquire 80% of issued share of Omega Ltd as long-term investment. Under paragraph 6 of AASB 3 Sunderland Ltd is an acquirer and Omega Ltd is an acquire. Sunderland Ltd has control over Omega Ltd According to paragraph 6 of AASB 10, if Sunderland Ltd has rights, to variable returns from its involvement with the Omega Ltd and can affect those returns through its power over the Omega Ltd. According to paragraph 31 of AASB 10 Sunderland Ltd shall not consolidate its subsidiaries or apply AASB 3 when it obtains control of another entity. Instead, an acquirer entity shall measure an investment in a subsidiary at fair value through profit or loss in accordance with AASB 9. Consolidation for Sunderland Ltd that requires controlled acquire to be measured at fair value through profit and loss rather than being consolidated is a violation of the basic principle that Sunderland Ltd should account for all its assets, liabilities, income and expenses under paragraph D01 of AASB 10.


Question 2


That applies when an entity recognises the revenue to represent the transfer of promised goods and services to the customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for these goods and services.


AASB 1055 Budgetary reporting, Pdf, corporate Arthur, March 2013.

This accounting standard deals with the budgetary disclosure of government, GGS (general government sector), and non-profit within the GGS of the government


AASB 1051 land under roads, Pdf, corporate Arthur ,1st July 2014. This accounting standard deals with land under roads by local governments, government departments, GGSs (general government sectors) and whole of government.


AASB 1055 is an integral part of non-profit accounting and government accounting procedures, this standard is important for accounting professionals and for future purposes. Various disclosures requirement in this standards through this standard will help make accounting more informative and accessible for users.

AASB 1051 applies to general purposes financial statement of local government, government department and whole of government, and financial statement of general government sector. Using this standard requirement will help to understand higher level of accounting knowledge and information for future purposes.



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